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Health Insurers Allege 'Rent-a-Patient' Fraud

12 Blue Cross and Blue Shield Plans Sue Surgery Centers in California

By Kristen Hallam

Bloomberg News
Saturday, March 12, 2005; Page A09

Twelve Blue Cross and Blue Shield plans from across the United States charged that a group of California-based surgery centers and medical management companies paid people as young as 12 to have unnecessary medical procedures.

They sued the centers for $30 million in what they called a "rent-a-patient" fraud, the health plans said yesterday at a Washington news conference. Recruiters allegedly enlisted hundreds of factory workers with comprehensive insurance to have colonoscopies, endoscopies and surgeries in return for travel to California and payments of $200 to $1,000.

The FBI is investigating similar claims against as many as 100 outpatient surgical centers, according to Special Agent Daniel M. Martino in Washington. Health-care fraud costs U.S. consumers $85 billion a year, or about 5 percent of U.S. health-care spending, according to the 40-company trade group Blue Cross and Blue Shield Association.

"The insurance industry has taken an aggressive approach to solving this problem," Martino said in an interview. Health insurers have lost as much as $345 million over the last three years because of such schemes, he estimated.

The suit, filed in U.S. District Court in Los Angeles, names 16 clinics or management companies and 34 individuals, including physicians who allegedly performed some of the procedures.

"This filing is a significant milestone in the fight against health-care fraud," Thomas P. Brennan Jr., director of special investigations for Highmark Blue Cross Blue Shield in Pittsburgh, said in a written statement.

The alleged fraud usually involved recruiting workers in manufacturing who had medical benefits through their employers, Martino said. The recruiters were paid around $400.

The patient would undergo treatment on a Saturday, Martino said. The surgery center would bill the insurer at a higher out-of-network rate, saying the treatment was required in an emergency. The surgery centers would use prompt-payment laws to pressure insurers to reimburse them within 45 days, before the fraud could be detected, Martino said.

In one case, according to the complaint, about 40 employees of Onyx Environmental Services in Phoenix and their dependents were taken to California for procedures at three medical units from May 2002 through April 2003.